McMahons' repaying of old debt a relatively rare gesture

Discharged of a legal obligation to pay their overdue bills, most bankruptcy filers never do. That is how the system was designed to work.

Yet anecdotes exist about curious individuals who, out of personal convictions, political expediency or other reasons, later decide to make good on old debts that they officially jettisoned years ago.

There was Walt Disney, who according to a biographer, eventually paid back creditors 45 cents on the dollar following the bankruptcy of his early Laugh-O-Gram film studio. And Harry Truman, the nation's 33rd president, who settled obligations on his long-out-of-business haberdashery.

Add wrestling moguls Linda and Vince McMahon to the club.

Connecticut's Republican nominee for the U.S. Senate, Linda McMahon announced last week that she and her husband will repay with interest all private individual creditors in their 1976 personal bankruptcy that happened before their wrestling entertainment business, now known as WWE, made it big. They have since expanded the creditor reimbursement to include labor unions' pension and health care funds.

In her written announcement, McMahon said one reason why they are now making good on 36-year-old debts are because the bankruptcy records, once assumed lost to time, were located last week by The Day in a national archives office.

Another possible reason - although unsaid by McMahon - was the gesture's effect of denying her Democratic opponent, current 5th Congressional District Rep. Chris Murphy, from using the old list of stiffed creditors as campaign ammunition to deflect attention from his more recent history of late bill payments.

Additionally, her statement's closing remarks seemed to suggest that McMahon felt a moral tug to repay old creditors, now that she and her husband have recovered from their early struggles and achieved extraordinary success and wealth.

McMahon's personal spending in this year's Senate campaign and her unsuccessful 2010 run now exceeds $65 million. By comparison, the young couple faced $955,805 in creditor claims when they filed bankruptcy.

"Many people in today's economy are facing hard times just like Vince and I did back in the 1970s," McMahon said. "I've been there, I've shared those people's struggles, and I've walked in their shoes. But I also know that things can change, and if given the opportunity people can come back stronger than before. That's what the American Dream is all about."

Several bankruptcy experts interviewed by The Day called it rare but not unprecedented in modern times for a person to voluntarily pay back creditors following a bankruptcy discharge.

Susan Hauser, resident scholar at the American Bankruptcy Institute, said the typical example of this phenomenon is a person who strikes it rich later in life after an earlier setback.

Edward Balleisen, associate professor of history at Duke University and author of "Navigating Failure: Bankruptcy and Commercial Society in Antebellum America," said that in the 19th century, the nation's more conservative political thinkers and commentators often insisted that even if bankruptcy could legally expunge an obligation to pay, a debtor still has the "moral obligation" to make restitution later on.

"The public focus on the moral obligations of former bankrupts who later regained wealth and position fell away in the 20th century," Balleisen said in an email. "Partly that's a reflection of the rise of the corporation; partly it's a function of the political acceptance of bankruptcy as a legal framework for indebtedness."

The McMahons intend to repay their eligible creditors at four times the initial amount due.

Her campaign would not comment Friday on why the McMahons' biggest and most numerous creditors - financial institutions, nearly all of them since absorbed into other banks - will not be paid via their new ownership.

There are practical challenges to repaying debt more than three decades old.

Some creditors have died, including Harold J. Hemingway of Burlington, the McMahons' largest individual secured creditor with a $109,575 claim. McMahon's campaign said Hemingway was affiliated with the former North American Bank & Trust Co. of Waterbury.

Peter Barberino, founder of a rental company that is now Barberino Nissan in Wallingford, died in 1987 without receiving the $4,514 he claimed he was owed by the McMahons. On Friday, his son, Tom Barberino, president of the business, opened the mail to an $18,058 check.

"I didn't even know that I was owed any money," he said.

John F. Papandrea of Meriden, a former attorney and probate judge who served as state housing commissioner in the late 1980s and early 1990s, is listed as a creditor seeking $355. However, today he can't recall having done work for Linda or Vince McMahon.

"He still has no memory of representing her, but how nice to get a little unexpected money!" his daughter, Mary-Rose Papandrea, wrote in an email Friday.

A former Colchester resident now in Park City, Utah, is anticipating a substantial check this week from the McMahons. Pamela Behn and her ex-husband, William Lanam, were owed $33,171 for the sale of their farm. Behn declined to say exactly how much the McMahons offered her but called the amount "more than fair."

Murphy, McMahon's Democratic opponent, has a history of late payments on financial obligations. He was reportedly late on his car taxes seven times between 1998 and 2005 and on paying a real-estate bill in 2005.

He also missed rent payments in 2003 and mortgage payments on a Cheshire home that led to a brief foreclosure scare in 2007.